European insurers lead decliners

Mobile handset sales up 6 percent in 2002

LONDON (CBS.MW) - European markets declined on Monday, as lingering economic and geopolitical fears combined with the worst ever loss in European corporate history to dampen interest for shares.

With insurers leading the declines around the Continent, the German DAX Xetra 30 index (1876534) dropped 3.7 percent in late trade to 2,342.07 while the French CAC 40 index (1804546) reduced 2.4 percent to 2.513,61. London was modestly lower. See full story on U.K. markets. The euro was holding gains vs. the dollar, trading at $1.1062.

M&A was quiet, outside of Spain. Gas Natural, Spain's leading natural gas distributor, said it may bid for Iberdrola, the country's second-largest electricity company, the Financial Times reported. Iberdrola has a market value of 12.8 billion euro.

Largest loss ever

Deutsche Telekom
DT
(555750) fell 8.2 percent as it reported a 24.6 billion euros loss for 2002-the biggest ever annual loss in European corporate history. Deutsche Telekom broke the days-old records from Vivendi Universal
V, +0.89%
and France Telecom
FTE, -1.36%
both of which lost more than 20 billion euros for the year.

Deutsche Telekom's net loss was 4.8 billion euros before exceptional items on an 11.1 percent increase of sales to 53.7 billion euros. Its EBITDA was 16.3 billion euros, compared to 15.1 billion in 2001, and its net debt reduced to 61.1 billion euros from 64.3 billion at the end of September.

But the company showed signs of improvement in the fourth quarter, with the quarterly net loss falling to 100 million euros from 2.5 billion euros a year ago.

Eric Lakin, an analyst at Banc of America Securities in London, notes the loss was within expectations and believes the company has a credible restructuring plan. "If anything, there appears to be scope for DT to exceed estimates on the back of further cost savings as the restructuring plan unfolds," he said.

EADS (005730) fell 1.4 percent as it said it will reorganize its space division to achieve profitability in 2004 by cutting 1,700 jobs, but said it expects its 2003 EBIT in the same range of 2002. The company said that improved performance from Aeronautics, Defense and Civil Systems, and Military Transport Aircraft should offset losses in the space division.

The European government-subsidized conglomerate, which producers Airbus aircraft, said on Monday that its 2002 net income before goodwill and amortization fell 14 percent to 696 million euros, on a 3 percent fall in revenues to 29.9 billion euros. Its 16 percent EBIT fall to 1.42 billion euros was slightly more than analysts expected. Airbus and Aeronautics Divisions were the main contributors to EADS' profitability, but its Space division recorded a negative EBIT of -268 million euros, the company said

Mobile handset growth in '02

Nokia (NOKI) was up 1.4 percent in Sweden earlier, as mobile phone handset sales were up 6 percent in 2002 to 423 million handsets, from 400 million units in 2001 and several million more than forecast, said Gartner Dataquest, one of the key research groups of the technology industry.

Market shares of the five key players changed little from the third quarter, with Finland's Nokia
NOK, +2.17%
still firmly in the lead and selling more than twice the number of handsets than its nearest competitor, Motorola Inc.
MSI, +1.63%
Ericsson
ERICB, -1.14%
another producer of handsets, fell 0.6 percent.

STMicroelectronics
STM, +2.97%
(012970) gained 1.2 percent as the Franco-Italian chipmaker will invest $250 million over the next three years to expand its chip production capacity in Singapore, the Business Times said, quoting president and CEO Pasquale Pistorio.

Saint Gobain (012500) improved 0.08 percent, one of the few gainers in France, on a report this weekend from Le Figaro that it will sell its Terreal terracotta tiles and bricks businesses for about 400 million euros. A spokesman declined to comment on the report, AFX said.

Insurer slide continues

Swiss Life took the biggest fall among insurers, down 13 percent on the virt-x trading system. The Swiss newspaper SonntagsZeitung said on Monday that the company is in violation of the European Union's solvency requirements. Solvency of insurers has been a continuing worry for investors in insurance shares, particularly in the U.K.

Aegon
AEG, +2.98%
(30176), the Dutch insurer, fell 8.1 percent in Amsterdam on Monday as it continued to struggle after last week's financials. Other insurers that fell included Allianz
AZ
(840400), down 5.4 percent, and AXA
AXA, -0.34%
(012062), falling 4.8 percent.

First Jan. outflow in European equity in eight years

European investors sold 100 million euros of equity funds in January, the first January outflow since 1995, according to research from Schroder Salomon Smith Barney. On a 12-month view, European mutual fund investment stands at 6.7 billion euros, the lowest level since July 1996.

Italians in particular fled from the asset class, selling over 1.4 billion euros worth, the tenth consecutive month of decline. French and Swedish were net buyers into equity, the report said.

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